Thank you, David Gardner and St James’s Place Asia and Middle East, for sharing your valuable market insights with our community in the SJP 11th November Weekwatch. This week, the focus is on the US Election 2024, Interest rates in the US and UK, tariffs and how they are already impacting production levels in China, the possibility of a snap election in Germany, plus Wealthwatch and In the Picture.

Stock Take

USA

• Wall Street Response to the Trump Win.

  • The US dollar posted its biggest one-day gain in over two years, underlining expectations that it will strengthen under a Trump presidency.

  • His plans to cut taxes and raise tariffs will likely lead to higher inflation and growth, meaning the Fed will need to keep interest rates elevated to prevent the economy from overheating.

• US bond yields soared on Wednesday, suggesting investors expect borrowing to increase under a Trump administration and, therefore, demand a higher return on their money.

• US Rate Meeting - Fed delivered a more conservative 25-basis point cut in interest rates.

• Wall Street gained ground after the Fed's announcement, as investors considered the possibility of tax cuts, relaxed regulations, and trade tariffs. The S&P 500 rose over 4% during the week, surpassing 6,000 points for its largest weekly gain of the year.

• US services sector had accelerated in October to a more than two-year high. The data added to other recent evidence of a stronger-than-expected US economy.

• This led some investors to question whether the Fed miscalculated when it started its easing cycle with a chunky 50-basis point rate cut in September.

UK

• UK could be one of the countries most affected by a dramatic increase in trade tariffs. It estimated that economic growth would slow to 0.4% in 2025, down from a forecast of 1.2%.

• The Bank of England (BoE) recognized that last week's Budget would increase inflation and decided to lower interest rates from 5% to 4.75%.

• This indicates that interest rates may take longer to decline. Even though inflation dropped below the Bank's 2% goal in September, it was anticipated to increase again. The BoE now predicts inflation will return to the target by mid-2027, not mid-2026.

• Expectations for future rate cuts are decreasing in both the UK and the US after recent developments.

China

• Trump’s protectionist policies could also have huge ramifications for China.

• Exports have improved the struggling economy, with last week’s figures showing the fastest growth in over two years as factories increased production in response to expected tariffs from the US and EU.

• The US is China’s number one export market, worth more than $500 billion a year, but in a bid to boost manufacturing at home, Trump has proposed tariffs of 60% or more on Chinese goods.

• Market disappointment over a local government debt package announced by China – measures seen as stabilising the economy rather than providing the stimulus needed to boost growth.

Germany

• Germany's coalition government fell apart after Chancellor Olaf Scholz fired Finance Minister Christian Lindner, leading to a possible snap election. This leaves Europe's largest economy without clear leadership as growth slows and the EU watches the potential return of a Trump presidency with concern.

Johanna Kyrkland, Chief Investment Officer at Schroders, believes the US economy will experience a soft landing after the election. However, she points out that trade risks and a protective approach could harm growth in other countries.

“We expect the Chinese authorities to continue with measures to offset this. Europe becomes more of a concern, however, as it could then become caught in the crosshairs of a more hostile trade environment - without the unified leadership required to tackle it.”

Johanna Kyrkland, Chief Investment Officer at Schroders

Wealth Check

How staff wellbeing can help you gain a competitive advantage

The latest CIPD labour market report highlights a trend called 'The Big Stay,' where employees choose to remain in their jobs. While this may appear good for business leaders, it may indicate that employees are staying due to disengagement rather than loyalty.

A study by AXA and CEBR shows that employees are more disengaged and facing burnout, stress, and mental health issues. With 23.3 million sick days annually, absenteeism is at a decade-high, highlighting the need for companies to focus on employee wellbeing.

What is employee wellbeing and why does it matter?

Employee wellbeing involves financial, physical, and mental health. When companies support this, workers tend to be happier, more motivated, and less likely to quit, which improves workplace culture, productivity, and retention. Small business owners may think they can't afford time or money for wellbeing programs, but many see the advantages. With an average employee missing 7.8 days a year, businesses should weigh the cost of long absences.

How to support employee wellbeing – 2 quick wins

Wellbeing initiatives should match your employees’ needs, such as help with living costs, flexible work, mental health support, or financial advice. Asking employees about their concerns helps businesses focus on what matters most.

Furthermore, as many struggle to balance work and personal life, managers should recognize these challenges. Being open encourages employees to share their worries and find ways to support them. Support can include flexible working hours, which can greatly help.

How financial advice can help

Due to the rising cost of living, financial wellbeing has become important for many companies. Offering access to a financial adviser can help employees with debt management, investing, and retirement planning. However, do not pressure employees to use this service; they might prefer to handle their finances on their own. To learn how financial advice can help you and your team, please contact us. We support businesses at every stage. An investment with St. James's Place depends on fund performance and may decrease in value, possibly resulting in a loss.

Sources

1Chartered Institute of Personnel and Development, 12 October 2023 (survey in over 900 organisations covering 6.5 million employees).

2AXA UK & Centre of Economic and Business Research, accessed 29 March 2023.

In The Picture - Watch the Video.

With the US election decided, our Chief Investment Officer Justin Onuekwusi and Head of Economic Research Hetal Mehta discuss how the outcome could impact markets, inflation and short-term volatility now that Donald Trump is poised to become president.

The Last Word

"I want to thank the American people for the extraordinary honour of being elected your 47th president and your 45th president. And to every citizen, I will fight for you, for your family and your future."

Donald Trump thanks voters as he prepares to step into the role of America's 47th president in January 2025.

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